The GOP has recently been working on tax reform, and both the House and Senate have versions of tax reform that are currently being hashed out in conference between the two houses. Aside from the caterwauling on the left side of the house, predictions of our moon exploding and destroying all life on the planet because taxes might be cut, reform of one kind or another is inevitable. Why?

Because it’s not really the revenue side of the equation that’s the bulk of the problem. It’s the spending.

Why does spending go through the roof, annually? Because the government can. Because politicians are rarely penalized for spending money. They’re typically rewarded for it, by being re-elected. They’re rewarded because they brought some of that federal pork back to their home states, and not coincidentally, their names are often found on the outsides of buildings that other people paid for. Some states are even proud of their Congressional representatives “bringing home the bacon” for them, as if there’s just a pile of magical money in DC and the job of Senators and Representatives is to back U-Hauls up to the pile and shovel as much in as they can (or pay their staffs to shovel), then call it a day.

The result of all this shoveling is $20 trillion in debt. That’s a $170,000 debt burden for every taxpayer – not every American, mind you, but just those who actually pay net income taxes. As the debt has doubled in the last 8 years, and the annual federal government’s spending has followed that same doubling, what’s happened to economic activity? Based on the hysteria of the left over tax reform, our very lives depend on government spending, because apparently all economic activity will come to a halt if we spend one less dollar next year.

But the reality of the economy is much different from those idiotic rants. In fact, if you take a look at the data, the opposite is true. As federal spending goes up, the M2 velocity of money goes down.

The velocity of money is the frequency at which one unit of currency is used to purchase domestically- produced goods and services within a given time period. In other words, it is the number of times one dollar is spent to buy goods and services per unit of time. If the velocity of money is increasing, then more transactions are occurring between individuals in an economy.

If you take a look at federal debt alongside the same M2 indicator, the idea that federal spending is what keeps the economy going (according to permanently-ensconced chowderheads like Nancy Pelosi), goes “poof”. It’s an idiotic assumption, that all federal spending is a net positive, and to even challenge that piece of it is something that’s off the Left’s table.

So as spending and debt go up, economic activity goes down. This is apparently news to Democrats in Congress.

But that’s the crux of the argument. You can’t have tax cuts, because we’ll be able to spend less, even though spending goes up, annually, regardless of tax revenues. The gap between spending and tax revenues is a permanent one, and any change to the status quo is Armageddon.

As the tax bill currently stands, the corporate tax rate reduction to 20% would put the United States on a much more level playing field with other countries, even if the effective rate is always lower than the official rate (which is another argument to strip down the tax code and carve-outs, but that’s a longer conversation). If you’re looking to free up capital that companies would use to expand and invest, that’s a very quick way to do it. At the very least, it would bring our rate nearer to the average of the G20 countries, which improves the ability to compete:

While the tax reform bills are a small step forward, the really tough work is on the other side of the table, and not the ideological one. The toughest challenge will be spending, and reducing it, so the debt above doesn’t crowd out all other economic activity, and dampen growth. Since debt is now over 100% of GDP (below), and the economy, while growing, is growing at historically low levels, especially coming out of recession, one is left wondering if Congress has the ability to stop this descent into madness. They don’t seem to be willing to even slow it down.

It’s an abdication of responsibility. Considering the incumbency rate, we are going to continue to let them fail, and not hold them accountable. Then it becomes our fault, not theirs.

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Tax cuts, often championed by Democrats (when they want to take credit for economic growth), are Bad, Horrible, Awful Things again, because, well, Trump and Congress

Take *that*, tax cuts! Er, Hitler!

are working on them.

As a fine example of a histrionic and economically illiterate analysis of the recently-proposed tax cuts, I give you the The Washington Post, that long-standing bastion of Austrian economic theory. How will the Post provide its readers with details around a policy that will impact the half of the country that actually pays taxes? Standing in as the sharp end of the Post’s analytic spear, the Post offers up Ruth Marcus, for the delightfully (and, one might guess, purposefully) limited take on the impacts of tax cuts and tax increases:

Yes, the economy grew robustly after John F. Kennedy proposed and Lyndon B. Johnson signed a tax cut in 1964 (the top rate went from 91 percent to 70 percent) and after Reagan cut taxes in 1981 (he later raised them, because of fears of the ballooning deficit). But the economy also grew robustly after Bill Clinton raised taxes in 1993 and anemically after George W. Bush cut taxes in 2001 and 2003.

From 1993 until 1997, the economy grew at 3.3 percent per year.4 While solid, this growth was certainly not exceptional. During that same time, real wages declined, despite the perception that the 1990s were an era of unmitigated abundance.

It was not until after a 1997 tax cut, passed by Congress—a tax cut President Clinton resisted but ultimately signed—that the spectacular growth kicked in. While small in static revenue impact, the 1997 cuts included a reduction of the capital gains rate from 28 percent to 20 percent. This opened the capital floodgates necessary for entrepreneurs to develop, harness, and bring to market the wonders of the new information technologies. business investment skyrocketed after the tax cut,6 and the economy grew at an annualized rate of 4.4 percent—33 percent faster than after the Clinton tax hike—from 1997 through the end of the Clinton presidency. Real wages reversed their downward trend and grew 1.7 percent per year during the same time.

Oh, and as for George W. Bush’s tax cuts – I’d also like to add that something else happened in 2001 that dramatically affected the country, and the economy, but hey, tax cuts didn’t spur growth. I get it.

But because we’re having trouble finding people who are for tax increases, here’s the former tax-increaser himself, Bill Clinton, calling for a corporate tax cut rate, in 2011. Which runs kind of counter to Ruth’s argument above. But let’s let the Hayek (not Salma) – loving President call it in his own words.

“When I was president, we raised the corporate income-tax rates on corporations that made over $10 million [a year],” the former president told the Aspen Ideas Festival on Saturday evening.

“It made sense when I did it. It doesn’t make sense anymore — we’ve got an uncompetitive rate. We tax at 35 percent of income, although we only take about 23 percent. So we should cut the rate to 25 percent, or whatever’s competitive, and eliminate a lot of the deductions so that we still get a fair amount, and there’s not so much variance in what the corporations pay.

Bill’s point isn’t a new one. The US is at a competitive disadvantage with foreign corporations that pay a much lower rate

Simply put, if you believe that the real engine for growth isn’t the government, but rather the people choosing what to do with their money, what to buy, invest in, or save, then you’re probably not a Democrat.

The sad fact is, though, that the other party, the Republicans, isn’t much better on this front, and have voted for massive spending increases, and have justified those increases in much the same way that Democrats do, which is that they try to pitch the spending to the groups that vote for them, to demonstrate the ways that spending benefits that specific group. In other words, they’re buying votes, with tax dollars.

As Ruth Marcus continues, though, apparently now we’re supposed to care about debt, when Republicans offer a way to improve the economy. I’m guessing Marcus’ track record as being a deficit or debt hawk was a weak one from 2008-2016:

Meanwhile, the national debt is77 percent of the economy, the highest since the end of World War II. It is on track to exceed the entire gross domestic product by 2033. That is even without a $1.5 trillion tax cut, the amount envisioned in the just-passed budget resolutions.

The debt doubled in 8 years under Obama. It took 240 years to get to $9 trillion in debt or so, and in 8 years, that debt doubled. But even that misses the point – it’s not

So – we’re just going to spend, regardless of revenue.

the tax revenues we’re collecting that drives the debt, it’s the spending. The enormous gap between revenues and spending is startling – not just the gap, but how much more money we’re both collecting and spending.

Not one peep from Marcus about spending. Not one mention in her article about the enormous leap in federal spending. If the tax cut decreases revenues, which it should, of course the gap will widen. But is the problem revenues?

Or is it, eternally, the unshakeable belief that all spending is a net good, that people keeping more of the money they earn is bad, that rich people (who pay 97% of all income taxes collected) are bad, only those who would spend the money other people earn are inherently, and by default, good.

It’s this sort of acquiescence to a large, centralized, and politicized government that’s caused the deaths of tens of millions in the 20th century, and as the hoary governments of places like Venezuela demonstrate, the catastrophes will continue, no matter how many times the lesson is thrown in our faces.

That reality doesn’t change Marcus’ conclusion, though – that tax cuts are reckless.

Trump wants tax cuts — the biggest ever! — because he promised them. Republicans take tax cuts as a matter of faith; they are desperate for a legislative win, any win, to take to voters next year. So deficit-financed tax cuts may be a political imperative. As an economic matter, they are simply reckless.

No word yet on Marcus’ forthcoming article that might state why the spending is reckless, or the debt incurred under the last administration might also be reckless, and

Nope. Instead of those things, a group of concerned Vermonters calling themselves “Vermonters for a New Economy” have decided that the primary answer to the problems above is a bank.

Yep. A bank. But not just any bank. A state bank. Meaning a bank that is funded, and backed, to one degree or another by public funds (the funding issue is just another one of those thorny details that no one really needs to think about, just yet). Which means, of course, that any risk or liability falls directly upon the shoulders and wallets of those who pay taxes.

And what is their mission statement? Their raison d’etre? Here it is:

Vermonters for a New Economy is a coalition of organizations, businesses, and individuals working to create a new economy for Vermont. You can work with us to design and enjoy the new ways we are owning and operating businesses, banking, exchanging goods and services, financing projects, and earning income. This work enables us to pursue regenerative economic activities that strengthen our food systems, build renewable energy, reuse and recycle byproducts, and foster creativity, culture, and healthy lifestyles.

I must have missed Banking 101, but I’m pretty sure the bank didn’t ask me about my healthy lifestyle choices when I applied for a mortgage. They wanted some details around income, liabilities, etc., because they’re crazy like that. But no mention of how their capital would foster my creativity. Which is mildly disappointing. It’s also fantastic that they’re allowing Vermonters to work with these New Economists as to how Vermonters earn their own incomes.

That’s generous of them.

But let’s let the New Economy Vermonters provide more of their own detail, in terms of why they think we need a state bank:

Our Planet — a VT state bank can provide the game-changing, long-term, low-interest financing that will power a transition to a just and sustainable future

Students — to access low interest education loans.

Homeowners — to get mortgages and home loans from the bank.

Entrepreneurs — who need credit lines, loans, and other forms of finance to help their businesses succeed.

Municipalities – the bank can offer competitive interest on public deposits and lower cost financing for public works.

Taxpayers — who will benefit from both the profits the bank makes and the services the bank offers

Well, that’s quite a bit to digest, so let’s take it one at a time:

1. Our Planet — a VT state bank can provide the game-changing, long-term, low-interest financing that will power a transition to a just and sustainable future.

The planet. So the planet needs a Bank? How did the planet exist, then, before humans evolved? Did Gaia patiently wait for first humans to evolve, then banking, in order to provide a high enough state of enlightenment before asking for funding? Gaia’s patience here with us is considerable.

So the federal government can’t do it, with virtually limitless resources, but Vermont can, now, because of one bank?

In fact, VSAC has said it’s “agnostic” on the idea of a state bank. So why list student loans as a justification, when the one institution that has historically provided student loans doesn’t see the need?

When the CEO of VSAC says they don’t need additional access to capital, maybe you should remove that selling point from your website.

3. Homeowners — to get mortgages and home loans from the bank.

You can already get loans from banks, easily – they’ll happily lend you money for a house, or equity loans. It’s how they make money. For FHA loans, you only need 3.5% down. Rates for fixed 30-year FHA loans are well under 4%. Do Vermonters not know how to apply for a loan, and the state bank will save them from their own ignorance?

And why the incentive to increase – via public funds – the number of mortgage lenders, increasing competition, when, in many cases, the same people who tout this state bank (like Bernie Sanders) want to decrease competition in other markets, like health care? Why is it a good thing to increase competition in one place, but not the other?

4. Entrepreneurs — who need credit lines, loans, and other forms of finance to help their businesses succeed.

They can get this already from existing banks and investors. What would a state bank provide that does not already exist? Other than offering riskier loans that will be backed by taxpayers? There’s a federal Small Business Administration that offers many channels for funding. What would this bank offer that’s not already available?

5. Municipalities – the bank can offer competitive interest on public deposits and lower cost financing for public works.

Municipalities already have access to funding through banks and bonds. Like the Vermont Municipal Bond Bank, which has been in place since 1970. If municipalities already have access to low-interest funding source, why do they need another one?

6. Taxpayers — who will benefit from both the profits the bank makes and the services the bank offers.

You mean like the benefits current federal taxpayers enjoy, like $20 trillion in debt? The profit the bank makes is the interest on the loan, which, for the federal government, increases as a percentage of total spending, and if the rates increase, even a little bit, will start to crowd out all other discretionary spending.

Which is really the heart of the matter. The supporters of the state bank are looking for a way to finance spending now that someone else will have to pay for later. It’s like giving a college student a credit card with no limit. Sooner or later that bill will come due, and the people who want to create and support that state bank will then be asking taxpayers to bail it out, just like some other large financial institutions, like Freddie and Fannie. Which have become, more or less, nationalized.

But the worst of the justifications for the proposed bank’s existence are in its own supporting documents, which make a few claims of fact that aren’t supported by reality. A few examples (page 6):

Assumptions made reality by simply writing them down.

Sub-prime mortgages are what Fannie and Freddie specialized in, and still continue to be the largest generators of these types of loans in the industry. Taxpayers had to bail out their poor business practices and the fact that they were understating their sub-prime exposure; there is nothing in the call for a state bank that would prevent this from recurring.

Secondly, citing Vermont’s low unemployment rate as evidence of economic stability means they either a) willfully ignore the reality of Vermont’s declining workforce participation rate, or b) don’t understand what they’re talking about. If they’re using this conclusion (below) as one of the underpinnings of the justification for the need for a state bank, they’re making a significant error:

Well, it does when we argue that the state’s economy is in great shape based on unemployment data. Then it’s ok to make that correlation argument.

If anything, the state’s demographics and the general leveling off of already-high housing prices won’t require a state bank to support increased demand for mortgages. In fact, the reason housing prices are (relatively) level is because demand isn’t increasing. There are simply fewer Vermonters looking to buy homes:

Vermont’s economy, and its housing market, are clearly not divorced from national trends. But our housing market seems to be under performing the national housing market, which is worrisome. Over the last two years, Vermont’s housing market, at least measured by prices, has gone nowhere. Nationally, prices are up 7 percent over the same period—not great, but at least it’s a positive number.

One of the reasons for our weak housing market is our underlying demographics. First-time home buyers tend to be in their 30s and early 40s. That’s precisely the demographic that’s shrinking in Vermont. And if there are fewer first-time home buyers, people trying to sell their houses and trade up to more expensive homes can’t find buyers. That clogs up both sides of the home-buying and home-selling market, limiting both sales and price appreciation.

The New Economy site also encourages readers to read the study that justifies the new state bank. Hilariously, the study recommends that the state not implement a state bank. That the capital needs are already met. That the current options available for financing are just fine. From page 3:

So…we *don’t* need a state bank, then? Oopsy!

Then what is the purpose of the New Economy site? To ignore the realities of Vermont’s business climate, Vermonters’ incomes, the demographic changes, and historical policy overhangs that make the state a lousy place to do business? Another bank won’t fix that. Another bank can’t fix that.

Only Vermonters can fix Vermont, by dismantling the policies and governmental apparatus that have put them in the place they are today. If that’s part of the New Vermont Economy, then maybe things will start to change.

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Recently, a small part of the Trump administration’s budget proposal generated a series of high-pitched squeals across the United States. Said squeals which could mostly be found in such squeal-oriented places like Facebook, Twitter, and college campuses, where squeals propagate like hippies at a free lunch buffet, and where economic reality enjoys a permanent holiday.

And the root cause for the squealing? A complete misunderstanding of the federal budget and how some non-profits are funded . But the squeals of anguish were not rallies to the cause of federalism. No. Instead, they were cries of outrage that Trump was cutting the Meals on Wheels program. A program that relies, so heavily, on government grants.

As Reason has noted, the issue is much less about the individual programs that receive grants. What Meals on Wheels does is a fantastic example of what local effort, and local control, can do to positively impact lives, and help people who need just a little bit of help, a meal, and even a wellness check, when no one is doing that for them. It’s the vehicle that spends billions per year on administering and doling out dollars that is the source of the issue, and ultimately some level of corruption – the Community Development Block Grant Program.

You don’t need to look far in the past to see this sort of corruption taking place. In June, the Department of Housing and Urban Development (HUD) sent a scathing letter to the Mayor of Honolulu Hawaii, calling on the city to return nearly $8 million in CDBG funds that it gave to Opportunities and Resources Inc. (ORI), a nonprofit redevelopment organization in central Oahu. The Aloha Gardens Wellness Center and Camp Pineapple 808 both were projects developed by ORI with federally issued CDBG money meant to serve elderly and disabled persons, but since completion, the projects haven’t exactly been used for their advertised purpose.

The HUD report claims ORI had been marketing the centers to the public as venues for weddings, parties, banquets, fundraisers, corporate retreats, conferences and family reunions. The city also lent ORI nearly $1.2 million in CDBG funds between 1989 and 1995, which it decided to forgive back in 2010. HUD found that this decision was made by city employees who were running for elected office while receiving campaign donations from ORI representatives. The report states:

“ORI has maintained significant support over many years by the direct involvement of high ranking City and State officials…The direct involvement of the officials’ appears to have placed pressure on staff resulting in the City ignoring regulatory violations in favor of completing the project and satisfying ORI’s requests.”

In other words, the funding becomes the driving policy directive, not the service that the funding might itself provide. The funding model subverts the local control because the dollars are critical to a political outcome, less so in addressing a local need.

Local control, and local accountability for dollars spent, should be the watchwords. But because the federal government throws billions around, annually, in thousands of programs, it would be extremely difficult to say no to those funds if you’re sitting in a small municipal office, wondering how you’re going to affect some local change. Which then creates the puppet strings that federal agencies, and ultimately politicians, use to buy votes, and influence voters. Once the city or state becomes hooked on the federal dollars, they can no longer say no to them – and are adversely affected when funding for those programs becomes a political football.

The accretion of these programs, in the federal budget, is what has given rise to the outsized spending and record deficits seen during the last 8 years. This growth isn’t directly attributable to one administration, but the Obama administration stomped down hard on entitlement spending, then tried to laughably claim that it reduced deficits – record deficits the administration itself had set in the years preceding its final year.

The result was a doubling of national debt in 8 years, a doubling of the debt that took over 200 years to first accumulate. We have had 4 years of trillion-dollar deficits. The first year the government started spending over a trillion dollars per year was 1987. 30 years later, we have deficits bigger than the total annual spend in 1987. Today we’re borrowing more to fund an annual deficit than our total spend was 30 years ago.

I’m noticing a trend here.

Hey, what’s a trillion in borrowing, amongst friends?

The historical record doesn’t show any sign of slowing down in spending, which means a further erosion of local control, leave alone any kind of spending efficacy metric that would allow for decision-making regarding the growth or reduction of spending on a program. Once a program is established, whether or not it’s doing something good or bad (if you can even quantify those outcomes), it will never, ever go away. It’s too late now.

And any call to reduce spending is met with the squeals. The self-agonized cries of those who believe, fervently, that it’s up to the federal government to fix local problems, address local needs, through taxation. Which is, in a way, a tithe of the conscience – that one is off the hook to get off the couch on a Sunday to help someone else, because the government is doing it for them, through their income taxes.

Or, more to the point, through the taxes of those filthy, evil rich people. The same people who pay 97% of all income taxes collected. Which will never, ever be enough to pay for the programs that help politicians get elected, to grow the spending of government again next year. When politicians have a credit card with a $1.5 trillion dollar limit on it, what’s their incentive to not spend more than we have? For them, the downside to spending less is not getting re-elected.

Until those political incentives change, you’ll continue to see the growth in federal outlays, and a continuing reduction in incomes relative to that spending growth, as the weight of spending and borrowing drags the economy into a perpetually smaller cycle of growth. It’s already happening.

Trump’s budget, while flawed (like every budget before his), is actually looking to address an issue around federalism, which is: Why do you need a federal government to sink its controlling claws into a local effort to help those in need? Why not just cut the check to your local charity of choice and avoid the federal middleman?

Why give more control to someone else over your own choices? Hopefully the answer to that isn’t “Because then I don’t have to think about it”.

Vermont is currently enjoying one of the lowest rates of unemployment in the country. Enjoying. Yes, like most things in Vermont,

An economy so strong you can’t stop it, you can only hope to contain it.

“enjoying” comes with a bit of a caveat. If by enjoying you mean “having a low unemployment rate with one of the weakest state economies in the country”, then yes, there is much to be enjoyed.

Yet even in the state’s own monthly statement on the labor market (November 2016), there seems to be some signs of reality slipping in. Those signs only appear after the preamble, of course, because low unemployment is automatically great news for Vermonters:

The Vermont Department of Labor announced today that the seasonally-adjusted statewide unemployment rate for November was 3.2 percent. This reflects a decrease of one-tenth of one percentage point from the revised October rate (3.3 percent). The national rate in November was 4.6 percent. As of the prior month’s initial data, the Burlington-South Burlington Metropolitan NECTA was tied for the sixth lowest unemployment rate in the country for all metropolitan areas at 2.2 percent (not-seasonally-adjusted). Overall, Vermont’s unemployment rate was also tied for sixth lowest in the country for the same time period.

That must mean thousands of people are moving to Vermont to enjoy its robust economy and vast repositories of high-paying jobs just waiting to be filled by eager workers, right? Right?

No. The number is just a reflection of the declining size of Vermont’s labor force, not the number of unemployed. In fact, the state’s lowest unemployment rate for the year was 3.1%, back in May 2016.

While the unemployment rate barely changed between May and November, the labor force shrunk by 1,200 people, and the total number of employed shrunk by 1,300 people, which results in a total unemployed number that’s barely changed. Yet there are 1,300 fewer people employed between the state’s lowest unemployment rate month (May 2016) and last month (November 2016).

Telling Vermonters in a press release that Vermont’s unemployment rate is tied for sixth-lowest in the country is so meaningless (absent any context), it’s almost deceptive. But the November press release goes on:

“The Vermont economy is more stable than the month-to-month data might suggest, as increases and declines are “ironed out” at the

Welcome to Vermont!

conclusion of the year. What we can see is a slower rate of job gains this year than in recent years. Yet, with Vermont’s low unemployment rate, it’s still a tight labor market with recruitment and retention challenges for our employers; and a limited availability of workers can adversely impact economic expansion and growth.

Yes, it’s always going to be a tight labor market when the labor force is shrinking annually, and has been since its 40-year peak in April, 2009, at 361,200 Vermonters in the labor force. In November, 2016, that number is 344,750. That’s 16,000 fewer workers in the labor force in 7 years. Vermont is featuring an annual worker reduction of more than 2,000 workers per year.

A couple of numbers from the state’s historical labor data that never seem to make it into the state’s semi-rosy press releases:

The average monthly number of workers in the labor force for 2016 is 345,000. In 2006, this average is just shy of 357,000. A reduction of 12,000 workers in the labor force.

The average monthly number of people employed in the labor force for 2016 is 334,000. In 2006, this average is just shy of 344,000. A reduction of 10,000 employed workers.

In fact, taking a look at a few of the lowest employment months in 2016, and comparing them to the historical high numbers in 3 cateogories – Labor Force, Employment, and Unemployment – and then compare them to the 2009 numbers, a certain trend becomes clear:

Vermont’s number of employed is relatively the same for the past 10 years.

Vermont’s labor force is shrinking dramatically, at a rate higher than the decline of unemployed – which creates a decreasing unemployment rate. This decreasing unemployment rate masks the fact that there is little to no job growth in the state for the last 10 years.

The historical context is…painful.

But the state’s conclusion as to how to address this issue, the fix, is a howler that has to be read at least twice to understand the depth of the disconnect:

Vermont needs to effectively utilize every state and federal job-training dollar to get people into jobs, and we need to address issues that will help Vermont be more successful: promoting gender equity, workplace civility, bringing under-represented populations into the workforce, creating job training programs that guarantee employment at the conclusion, and resolving the “benefit cliff” so that anyone who wants to work can do so without suffering adverse economic impacts.

Oh, so that’s all it takes! Gender equity will create high-paying manufacturing, technical, and financial jobs for all inequitably-gendered Vermonters to enjoy! I’d gasp with pride but I’m too busy gasping in astonishment.

Let’s look at that State of Vermont sanctioned checklist to fix the economy a bit more closely:

Gender equity (I’m assuming this reflects how much you have invested in the value of your house based on gender?)

Workplace civility (remember, you have to have a job first before the workplace’s civility can be measured by the Vermont State Civility Department)

Create job training programs (because decades of job training programs have resulted in the numbers above, so let’s double-down on that approach).

Resolve the benefit cliff (this from the state that tried to institute single-payer, a system that has failed in Vermont as well as nationally, and has created people taking more part-time jobs because Obamacare’s incentives are upside-down).

Here’s what’s not mentioned in the press release, so I offer these up as suggestions to the State of Vermont, if they’re not too busy creating gender civility or the like:

Stop electing governors who promise something for free but winds up costing $200 million to “cover” only a small fraction of Vermonters who were uninsured, but qualified for insurance of some kind regardless of Peter Shumlin’s flailing attempts at implementing single-payer, and, well, you’d get more businesses interested in investing and expanding in Vermont when they know their costs won’t swing on the whims of state politicians interested in national offices. Like in DC. (Ahem).

Stop electing governors who usurp the authority of the state’s Public Service Board (which is supposed to represent the peoples’ interest, not the governor’s) and shutter the cheapest and most reliable electricity in the state’s history – Vermont Yankee.

Stop electing governors who tout new ‘clean-energy’ jobs as part of the state’s job-growth numbers, while happily ignoring the fact that federal subsidies – funded by taxpayers – pay for the bulk of those new ‘jobs’.

That said, the first step for any corrective action is up to Vermonters, who, at least in the last election cycle, seemed to have grasped what works, and what does not work. It’s time for the State of Vermont to catch up to its citizens.

The Department of Public “Service”, that same wonderful entity that helped bring about the shuttering of Vermont Yankee, which had the happy result of increasing electrical costs and dependency upon non-locally-generated power, now suggests, strongly, that Vermonters start moving into caves:

Giving up some rural landscapes for solar arrays, sharing cars and driving less, and generally using less cheap oil and gas are all in order if the state has any hope of achieving 90 percent renewable energy usage by 2050.

This was the message of the DPS at a public forum held at the Vermont College of Fine Arts on Tuesday morning. Included in the crowd of about 100 were some state legislators and energy professionals.

The forum allowed the public to provide input on the standards the DPS must create per Act 174 of 2016 for ensuring consistency of regional and municipal plans with state energy policy.

In other words, like with schools, you can create your own policy, as long as it conforms to what the state is going to tell you to do anyway.

Director of the Planning and Energy Resources Division of the DPS Asa Hopkins led much of the initial presentation. He said that eventually communities should create maps that overlay what he categorized as primary and secondary constraints for alternative energy development.

Oooh! Maps! To where the buried energy treasure lies? Oh, no, wait. Not the fun kind of maps. He means anything (more or less) found outside:

So, in other words, you’re required to make renewables part of regional energy planning but you can only do so within the state’s proscribed box o’ places to site said energy sources, like solar, else the sky falls in and bad things will happen. In the form of penalties.

Hopkins suggested a shift from oil and gas to renewables would mean, from an economic perspective, a shift away from operating costs (primarily fuel) into capital costs (infrastructure). He suggested the overall aggregate of energy costs should stay relatively the same, give or take about 5 percent.

Funny, that’s as much as the electric rates for Vermont Yankee went up (5%) when the Vermont legislature decided that it could decide whether or not Vermont Yankee could continue to operate, because as every Vermonter knows, all legislators are highly experienced energy professionals with decades of knowledge to back up their decision-making:

Vermont’s three largest utilities use about one million more MW/H of “system power” now than in 2011 (before the March 2012 expiration of Vermont’s utilities’ contract with Vermont Yankee which provided about one-third of the state’s power). System power is the term for electricity bought from the New England transmission grid, and is comprised mostly of fossil fuel power (especially natural gas), as well as some nuclear, hydro and renewable power. Green Mountain Power, Burlington Electric Dept., and Vermont Electric Coop use 1.8 million megawatt hours of “system power.” In 2011 the same three utilities used 847,000 Mw/h of system power, according to the “Utility Facts” study released in February, 2013 by the Vermont Department of Public Service.

Over the 12 months from December 2011 to December 2012, Vermont’s electricity prices rose 5.1 percent, according to the EIA. During the same time period, rates in New York and every other New England state (except Rhode Island) decreased.

In the same way that Vermonters are being told that they will a) adhere to the state’s incalculably stupid energy policy (which is really just a

The latest in Vermont’s new hi-tech homesteads! No power required!

vehicle for politicians to use to get elected), they’re also told that b) it really will only cost 5% more.

Just like when Vermonters were told their health care insurance costs wouldn’t go up much (in fact, they were told it would go down), it would be easier to enroll, and they would have more choices. In that regard, it’s not so much as accepting the lie itself that the state is telling you, it’s that you get to choose which lie you want to believe in. That’s classical market thinking, Progressive-style.

Not mentioned by the state’s Progressive Peoples’ Brigade are the hard and unyielding economic realities of cost: When the cost of something goes up, less of it is demanded, and that rule goes for power, too. Except for local businesses, which are small and depend upon the general economic vitality of Vermont to keep food on the table – and a booming travel industry – bigger businesses can and will move, to places that aren’t apparently out to shutter them. While politicians like Peter “Thanks, I’ll Quit While I’m Barely Ahead” Shumlin tout the state as a “great” place for jobs, the hard smack of reality is that the bulk of job growth is in service jobs, which are not well-known for their high rates of pay.

Electricity is a cost in every economic activity, but especially manufacturing. The price and reliability of electricity are critical factors in the manufacturing business model. Even the Shumlin administration, which had previously worked to not cut IBM a break, finally decided that the rates were an issue in 2014 – well after IBM had already voiced its concerns.

Chris Recchia, commissioner of the Department of Public Service, said the rate freeze was particularly important this year for IBM.

“It is no secret that they are struggling,” Recchia said. “And a rate freeze for them was going be very helpful for additional planning in the coming years.” Though the freeze doesn’t prevent IBM from leaving the state, he said, “I think they would describe it as every little bit helps.”

No kidding. You think so, Chris?

IBM said in testimony to the Public Service Board that electricity rates in New York are much lower than they are in Vermont. And New York has “made an aggressive push” to attract high-tech businesses like GlobalFoundries, the tech company rumored to be considering the purchase of IBM’s Essex plant.

“Competitors in other geographic areas are paying electric rates significantly lower than IBM Vermont’s rates,” said Nathan Fiske, an IBM site energy manager, in prefiled PSB testimony on May 30. “Our competitive disadvantage, as a result of the higher electric costs paid by IBM Vermont, is very substantial.”

Which is one of many many reasons why Fab 2000 is now sited in New York, not Williston, Vermont, providing jobs to New Yorkers instead of Vermonters (not including the Vermonters who moved there to find a new job in the new fab, part of Vermont’s economic exodus).

But now, finally, the state has come clean: It wants a diminished future for Vermonters, mandated from a central planning agency. How this

Not pictured: Chowderheads frantically dialing the power company when the rolling blackouts start. In January.

translates out to Vermonters in the real world, though, might not quite align so nicely with the Vermont Progressive Utopia:

A recurring theme in one of the discussion groups was “One-size-fits-all is a difficult standard to work with,” as Judith Jackson of Irasburg put it.

State Rep. Joseph Troiano, D-Stannard, reiterated as much. He said Stannard has of a population of only about 150 people, with no paved roads and certainly no public transportation. Residents are spread out and they go to work in different directions, so any notion of ride-sharing is pretty much off the table.

Vermont is in the bottom half of states for population density. Add in the fact that for half the calendar year there’s the real possibility of snow and ice factoring into transportation decisions, and you’re not really likely to see someone from Buel’s Gore biking to work in South Burlington, and, well, this “plan” starts to seem irrationally optimistic.

Moving a weak and demographically shaky economy to one that has less predictability in access to electricity, with uncertainty in rates, does not equal a massive influx of speculative capital, in search of Vermont’s next big economic success story. The Ministry of Truth, in the form of the DPS, is doing a painful disservice, again, to the people of Vermont, that it purports to represent.

We work to advance all Vermonters’ quality of life, economy and security through implementation of our statewide energy and telecommunications goals, using sound statewide energy and telecommunications planning, strong public advocacy of the public good, and through strong consumer protection advocacy for individuals.

So which is it? A reduction in the standard of living to adhere to the bureaucracy’s latest 5-year plan, or working to advance all Vermonters’ quality of life?

The best summary statistic we have to describe a state or nation’s economy is gross domestic product, the total dollar value of all goods and services produced within its borders. Vermont’s GDP — $30.4 billion in 2015 — pales in comparison to the U.S. total of $17,800 billion. That’s usually referenced as $17.8 trillion, but it’s hard enough for me to conceptualize a billion dollars, much less a trillion, and comparing Vermont’s GDP to the nation is best done using the same units of measure. We could also say that Vermont’s GDP is $0.0304 trillion, but that’s even harder to conceptualize. At any rate, Vermont’s GDP is the smallest of any state in the nation, below even Wyoming, the only state with fewer people than Vermont. At the other end of the list, California leads the nation with a GDP of $2.5 trillion.

But worse, even when comparing a barely anemic growth rate in GDP in Vermont to New Hampshire’s more robust rate, there is much more compelling economic evidence that the state is trending downward. In a very critical category: Income.

GDP goes up in both states, but incomes go down in Vermont. Shocking.

Vermont’s median household income has never been higher than New Hampshire’s, at least going as far back as 2000 (earliest year of the FRED data). New Hampshire’s population is roughly twice that of Vermont’s, but on the median household income basis, that population factor is accounted for.

Worse, the trend in Vermont is increasing spending and employee hiring in the public sector, while NH has been trimming the number of employees in the public sector. Vermont’s answer to stagnation is to hire more employees; New Hampshire’s seems to be the opposite.

One of these trends is not like the other.

In fact, between the peak of government employees for both states in the January 2010 timeframe (above), until January 2016, here’s how NH and VT compare:

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Bernie Sanders, a man whose entire existence has been funded by the earnings of people who work for a living, has famously proposed to spend even more of other peoples’ money, to the tune of $18 trillion or so, over the next 10 years. This is in addition to what the USG is

In Bernie’s mind, this is far too little spending. Wait. Did I say “mind”?

Well. Where are all these massively underutilized dollars going to come from, anyway, so the federal government can correctly spend them for us? Is $18 trillion sitting under a really large number of mattresses?

As it turns out, the answer to the mattress question is “No”, and even an economic simple Simon like Sanders (apologies to Simons everywhere, simple or otherwise, excluding an apology to Sanders) can look at the data and understand that, but he doesn’t want to. Why? Because he doesn’t have to, that’s why – he can easily peddle “free” to people who still believe in such things as, well, things not having a cost, to them or others, because there’s never a shortage of people who will line up for something they did not earn.

Bernie’s selling point is that The Rich ™ can and will pay for it, a canard that has been used by such other lovely humanitarians like Lenin and Mao, whose actions resulted in the deaths of tens of millions. But instead of pointing out history to a reality denier like Sanders, let’s look at the actual income paid into the IRS at all income levels, and see what’s actually there to be taxed. All data courtesy of the IRS.

In 2013, the modified taxable personal income total was $6.4 trillion. Total taxes generated were $1.265 trillion. But take a look at where the bulk of those tax revenues came from – they came directly from the middle class, not the “rich”. Any plan of Sanders that involves increasing taxes to pay for additional spending will come directly out of middle-income pockets.

Why? Because the “rich” often don’t earn a salary, they earn income off investments, which is taxed at a different rate, and is money actually risked in the economy. Secondly, if someone has a million dollar home, they might be considered rich in assets, but you can’t install an ATM on the side of your house to give you cash from the asset on your way to the supermarket. That asset can be converted to dollars (through a loan against the asset) or sold, but it’s not income that can be taxed.

In fact as a percentage of total taxes paid, the $100,000 to $200,000 bracket bears the biggest federal income tax smack of anybody. Now, in Sanders’ world, $200,000 might sound like a “rich” person, but a married couple earning $75,000 apiece, for $150,000 in total household income, would probably not be perceived as rich by anyone who knows what a mortgage payment on a simple $200,000 home is, and if a child comes along, well, those incomes start looking even smaller.

The income brackets from $50,000 through $500,000 constitute 66% of all income taxes collected. These brackets are the ones that are currently the hardest hit in terms of tax burden. It’s where the potential income is to be taxed in the first place.

Soak the middle! Er, the rich!

So anything Sanders proposes in terms of new taxes will be disproportionately burdened on the very families he preaches he’s going to take care of.

Where would Sanders get that additional $1.8 trillion of annual spending? In order to generate that additional $1.8 from the $50K-$500K brackets, he would have to double the effective income tax rate. Double it. Raise your hand if you’ve seen Bernie mention doubling the middle-class income tax rates.

Now, Bernie wants a blend of additional tax increases and revenues, so it would not fall entirely on the middle-class, but since income taxes constitute about half the USG’s tax revenues, that’s where the biggest hit will have to come from. It’s not a choice.

But to make it worse, half the country pays no net income taxes. Yet they get to vote in the economic duferati like Bernie Sanders, who has promised to give that half something for nothing, again, and has ridden that mantra all the way through Iowa. Greed sells, it seems, but only Bernie seems to think it’s corporations that are greedy. When the people who are apparently not too busy to be working at an actual job rush out to see him on the campaign

The Shumlin administration has placed a partial dollar amount on state staff costs stemming from manual processes and workarounds associated with Vermont Health Connect’s messy open enrollment period earlier this year.

The amount? $800,000 per month. That’s for the costs incurred for “staff augmentation” needed to process renewals manually “this winter and spring,” according to Vermont Health Connect spokesman Sean Sheehan.

The renewal and open enrollment period was from November 2014 to March 2015, which would mean the state paid at least $4 million to work around the incomplete IT system.

“Staff augmentation” is code for “additional unanticipated payroll spending for a website that was promised to work easily for all Vermonters at no additional cost to Vermonters, because it would be paid for by federal monies.” As it turns out, implementing your own version of an exchange website is expensive, will incur costs not anticipated in the original scope, and will impact Vermont’s overall state budget negatively when it’s already operating on razor-thin margins.

So another $4 million is paid out of pocket to process routine, standard, run-of-the-mill changes made to health care plans that used to be done entirely outside of the state’s control. Now, in order to provide health care to Vermonters, these changes are now being ably handled by the same people who once said it wouldn’t increase the budget by a dime, and would, in fact, save money.

solid date in place for recovery, nor any kind of a finalized recovery plan. In fact, a large-scale IT project that switches software vendors in the middle of the project is an air-horn klaxon-esque indicator that the requisite requirements work was not done up front, which is what any project manager knows is critical to success. The state cannot escape the triple constraint any more than it can escape the reality of gravity, or, apparently, the reality of Vermont’s politics.

Vermont Health Connect’s implementation was a political vehicle for Shumlin, not a project to actually provide health care. Even if you issued every Vermonter an insurance card, magically, insurance that was paid for out of a unicorn’s lockbox of gold coins hidden deep in a cave in Buel’s Gore, that in itself does not provide one second’s worth of health care to any Vermonter. It is access to health care, not an insurance card, that should determine whether or not Vermonters have what Peter Shumlin has called a “right” to health care.

Vermonters have access to health care. They had it before the state decided to spend several hundred million dollars failing to create a website. The mix of payers was available to every Vermonter, regardless of income level – commercial insurance, Medicare, Medicaid, VHAP, etc – every Vermonter had access to one of the payers, and had access to care.

The website itself is meaningless. It’s just an enrollment vehicle, and even in that it fails. It also fails because it’s not integrated with Medicare, or military health plans, and can’t handle plan changes without laying out hundreds of thousands of dollars in additional spending, monthly, to process the changes manually.

Would health care costs decrease if the dollars spent to implement a website were spent on care instead? If we spend $200 million on a website, and the state’s largest hospital’s budget is $1 billion (in net patient revenues), then Shumlin threw 1/5 of a year’s worth of budget away on an unneeded failure.

As Governor, Peter is determined to get tough things done. Since his inauguration, he has been working hard to create jobs for those who need them and raise incomes for those who have jobs, control skyrocketing health care costs, expand broadband and cell service to every corner of the state, reduce recidivism, invest in quality education opportunities, and rebuild our roads and bridges. Taken together,

Nope. We’re gonna need a bigger rope. Or a global budget?

these and other key goals represent an ambitious agenda to create a brighter economic future for Vermonters.

I guess Shumlin’s definition of “control” means something entirely different to him than it does for the rest of us. If anything, Shumlin increased the cost of health care, by:

By deciding to create a Vermont version of a health care enrollment website when the federal version was available, he’s incurring millions in additional costs in the creation, maintenance, and manual support required to keep the site operational.

Increased the financial reporting and regulatory compliance burdens on all the state’s hospitals, which in part means additional staff hours required to maintain unique budget reporting to the Green Mountain Health Care Board.

Not one of the things done by the Shumlin administration has provided care to a Vermonter that needs it. Not one thing. And instead of getting tough things done, Shumlin is now quitting the office, and the Vermonters he was so “determined” to help. While the Green Mountain Care Board awarded Blue Cross/Blue Shield a 5.9% increase, this was lower than the request rate increase of 8.6%, which will mean that there may or may not be monies available for reimbursement at the lower, approved rate. Kind of like how Medicare only reimburses a certain dollar amount for any procedure, regardless of actual hospital costs.

It turns out that helping himself to a several governorships was Shumlin’s most successful achievement, considering that all of his determination has not changed the reality on the ground that hospitals, insurers, and patients have to live with, on a daily basis.

The slowest economic recovery in post-WW2 history will likely continue in FY16 and FY17, with some acceleration bringing slightly above-average revenue gains, though very close to previous expectations. Virtually all of the current changes in General Fund revenues relative to the prior January forecast, per the below chart, are the product of statutory changes made in the last legislative session, and represent about $30 million in new tax revenues.

So the budgetary forecast wasn’t “fixed” based on significant reductions in YOY spending, nor by accelerated economic growth. The General Fund revenue growth is all based on new taxes.

These tax changes primarily impact the General Fund, with the largest tax changes affecting personal income and sales taxes. Without these new tax revenues, the General Fund would have increased by about $9 million in FY16 and declined by about $1 million in FY17, relative to January projections.

But even this outlook has its caveats, as indicated near the end of the report, specifically regarding the General Fund (the largest revenue source in the budget), on Page 15 (1st paragraph):

As illustrated in these tables, and consistent with past projections, longer term revenue growth from the mix and structure of the taxes in the three funds analyzed herein is unlikely to keep pace with recent levels of expenditure growth (emphasis added).

In other words, tax revenue growth rates do not match expenditure rates, which means the state is still consistently budgeting to spend more than it takes in.

But the real impact of Vermont policies is being felt where it’s always felt – in the lives and pockets of working Vermonters. The forecast cites the low unemployment rate Vermont is “enjoying”, as if that constitutes evidence of some kind of recovery:

Vermont employment growth has also strengthened in recent months, with year over year growth in the past 12 months accelerating to 1.4%, vs. 0.7% in the preceding 12 month period. This has pushed the State unemployment rate to 3.6%, the lowest in New England and the fourth lowest in the U.S.

Vermont employment has increased in recent months, but compared to historical employment levels the state is still an employment trainwreck. The number of employed Vermonters, what the state’s forecast calls “employment growth” has increased from prior months, to 336,550 in June 2015. In January 2015, that number was 334,550, so clearly some hiring is occurring.

But to put this in a larger perspective, the last time Vermont had 336,550 employed, it was October 2012. In other words, it’s taken Vermont 2.5 years just to climb back to 2012 levels of employment.

To give it more of a historical perspective: What was Vermont’s highest employment level in the last 10 years? 344,150, in April 2006. Which means Vermont now has roughly 8,000 or so fewer people employed now than 10 years ago.

Vermont’s labor force – the number of people available and willing to work – has shrunk in almost direct correlation to the decrease in employment numbers. The labor force in April 2006 was 356,700. In June 2015, the labor force is 348,950, a difference of -7,750. This is why Vermont’s unemployment rate in April, 2006, of 3.5%, looks so much like June 2015’s unemployment rate of 3.6%, even though we have about 8,000 fewer people employed.

To put this a bit more painfully, Vermont has lost an average of 800 jobs every year for the last 10 years.

So while the state’s latest forecast loudly touts the low unemployment rate, it neglects to mention that a) the total number of Vermonters employed is at historical lows, and b) the labor force itself has shrunk.

A shrinking labor force is not an indication of economic health. It’s an indication that there are fewer opportunities for employment in the state.

Oddly, the report also discusses income inequality (page 7 of the report), as if a more equal distribution of wealth is a desired goal, and discusses the “owners of capital” as if it’s straight out of the Marx/Engels reader. But as more and more people drop out of the labor force, it’s entirely unsurprising that incomes are reduced. In fact, since the state’s own long-term labor forecast calls for the largest job growth sectors to be in the service industry, whatever policies the state has been putting into place to improve the economy, and thereby the incomes of Vermonters, is not working.

By the state’s own admission, its economic policies are having the opposite of the desired effect:

Incomes are down in the recession – so let’s fix that by raising taxes!

The report goes on to state:

Income growth has become increasingly concentrated among the highest income groups over the past 30 years and this has continued during the current economic recovery. past 30 years and this has continued during the current economic recovery. Between 2009 and 2012, recent studies estimate that virtually all real U.S. income growth accrued to the highest 1% of all income tax filers. These same analyses, however, suggest that in Vermont, income inequality has not been quite as pronounced, with income growth among the top 1% during this same period of 21.8% vs. growth among the bottom 99% of about 4.6%. They also suggest that longer term income inequality, though growing from lows in the late 1970’s to levels in 2012 not seen since the late 1920’s, are similarly less pronounced in Vermont than in the nation as a whole.

So income growth is only good if it’s at the lowest income groups? Considering that the highest income groups pay the vast majority of income taxes collected, is the state arguing for reduced incomes at the highest levels so things are less “unequal”? How will budget gaps be filled when the rich are no longer quite so rich? Since half the country pays no net income taxes, how, exactly, would increased state expenditures be paid for if the 1% didn’t have increased incomes?

As the report says on Page 11:

The increasing volatility in revenues due to a growing reliance on Personal Income,

Deep thoughts for a Vermont legislature.

Corporate and Estate taxes, was on full display in both FY14 and FY15. In FY04, these three tax categories comprised 50.6% of Available General Fund tax revenues. In FY15, they represented 60.9% of revenues, and are expected to exceed 62% within the next five years.

So while bemoaning inequality, the report also states Vermont has become and is increasingly becoming reliant on personal incomes to constitute the bulk of General Fund revenues. Shouldn’t the state, then, be celebrating wage inequality? Who else is going to fund the General Fund?

The state’s forecast now shows that the anticipated budget will be in the black, but so did the prior years’ budgets, which sometimes required a budget recission one month after the budget was passed. When the legislature scrambles to find yet another tax, this time in the form of one on sugary drinks, one which places both an additional cost of compliance on the backs of business owners and increases the aggregate tax burden on Vermonters, and then counts itself as a fiscal hero for doing so, the environment is created that assumes that this is the way budgeting and the state’s economy should work. In other words, Vermont will see these same steps taken again and again.

What’s really happening is that the state is patching holes in a sinking ship, and is running out of things to patch it with. What doesn’t help is the state’s continuing demonization of those who pay the majority of the bills in the state, and who will share an ever-increasing burden of doing so.